Auto lending first-party fraud losses hit $7.2B in 2025

Auto lenders reported a surge in fraud in 2025 as scammers used their real identities and fake documentation generated with AI. Full-spectrum auto lender and fintech Lendbuzz is using AI technology to verify documents as more fraudsters us AI to generate fake documents, including bank statements, licenses and other IDs, Chief Executive Amitay Kalmar told Auto Finance News . Financial fraud in auto is not decreasing, he said. “AI will present new risks, and we’ll all have to manage them carefully,” Kalmar said. Income misrepresentation is one of many types of first-party fraud, in which scammers use their real identity. First-party fraud, which includes credit washing, made up 69% of auto lenders’ estimated total of $10.4 billion in fraud-related losses in 2025, according to risk management provider Point Predictive ’s 2025 Auto Lending Fraud Trends report published April 8. Income and employment-based fraud alone accounted for 45.2% of the total exposure. The rise in first-party fraud comes, in part, from lenders more effectively combatting identity theft and other fraud types, Frank McKenna , chief fraud strategist at Point Predictive, told AFN . “When lenders close one hole, [fraudsters] find another hole to exploit.” — Frank McKenna, Point Predictive “When lenders close one hole, [fraudsters] find another hole to exploit,” McKenna said, noting that social media activity is also increasing the amount of first-party fraud. Total auto lending fraud losses are estimated to have jumped 13% YoY , and Point Predictive expects fraud losses to exceed $10 billion again in 2026. AI a 'double-edged sword’ AI tools are helping scammers more easily commit fraud, and affordability pressures may incentivize consumers to commit fraud, according to Point Predictive. AI “is a double-edged sword when it comes to cybersecurity and fraud” as it allows scammers to be faster at exploits, while allowing lenders and others to use AI-driven fraud prevention, Kate Burkhardt , senior principal at venture capital firm AutoTech Ventures , told AFN . Burkhardt targets early stage investments in cybersecurity, AI-enabled platforms and software-defined systems. Just as AI-generated documents have become increasingly popular, businesses use AI-based technology to analyze images believed to be AI-generated for visual anomalies or to identify fake business listings, she said. The volume of AI-generated paystubs for loan applications increased almost 500% between April and December 2025, according to Point Predictive. Generative AI can also increase the number of scams that target consumers, with fraudsters using the tools to impersonate dealerships and lenders, Point Predictive’s McKenna said. “Lenders will have to grapple with that,” he said. Meanwhile, pressures around vehicle prices, interest rates, and insurance and fuel costs can limit consumers’ available income, McKenna said. Customers are incentivized to inflate their income during periods of economic stress to quality for vehicle loans, he said. “Affordability drives people to try to qualify for the loan, and the biggest qualification point is often income,” McKenna said. Point Predictive’s affordability risk index, which measures car prices, loan amounts, income, credit scores and loan terms, reached 144 in the fourth quarter of 2025, down from a peak of 150 in Q4 2023, but up 44% from 2017, according to the report. The higher the index rises, the greater financial strain for buyers. [caption id="attachment_58360486" align="alignnone" width="1092"] (Courtesy/Point Predictive)[/caption] Most common fraud types By segment, the most popular fraud categories rose year over year in 2025, according to Point Predictive: Income and employment misrepresentation grew 21% YoY, costing lenders an estimated $4.7 billion in auto fraud losses; Synthetic fraud and credit washing — in which customers fraudulently remove legitimate tradelines to inflate their credit scores — grew 7% YoY, costing lenders an estimated $2.5 billion in auto fraud losses; Identity theft was flat YoY, amounting to an estimated $1.6 billion in auto fraud losses; Powerbooking — in which dealers trick lenders into financing a vehicle for more than it’s worth — rose 19% YoY, representing an estimated $750 million in auto fraud losses; and Bust-out fraud — in which scammers fraudulently finance hundreds of cars and sell them — grew 83% since 2021 and cost lenders an estimated $250 million. Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Auto lending first-party fraud losses hit $7.2B in 2025

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